Data, Design, Diabetes: Behind the Scenes of Rapid Innovation in a Virtual Incubator

Guest post by Charles Huang (@1CharlesH), mentor at DDD and Blueprint Health.

It is an exciting time to be an entrepreneur these days. President Obama earlier this year launched a Startup America initiative to promote entrepreneurship in America, citing the need for the US to maintain its competitiveness in international business through tech innovation and superiority in particular. For those that are tech enthusiasts, i.e. those in Silicon Valley, the importance of technology start-ups and entrepreneurship isn’t a new fad. Start-up technology accelerator and incubator programs, such as TechStars and Y-combinator, have been around since the mid 2000’s to help entrepreneurs grow businesses from ideation to product development and launch. Thanks to President Obama and Congress, who passed the HITECH Act in March 2009 and Affordable Care Act in March 2010, there is now also great interest in the intersection of health and technology innovation, aided by the billions of dollars earmarked for technology adoption by health care providers and health insurance companies. This interest in “healthtech” is further evidenced by the recent creation of health technology specific incubators all across the country such as New York’s Blueprint Health, Chicago’s Healthbox, and San Francisco’s Rock Health.

It should be noted that established health care and life science companies are also re-thinking how they innovate beyond their own four walls to better leverage technologies that aren’t native to their industries, such as mobile, digital and social media, the Internet, cloud-computing, etc. The 2011 sanofi-aventis U.S. Innovation Challenge: Data, Design, Diabetes (DDD) is such an example of a life science company spurring innovation through a public and crowd-sourced challenge with financial rewards and a virtual incubator that was previously introduced here. The challenge was announced on June 9, 2011 in DC, and has a Demonstration Day for five semi-finalists in New York this Thursday, September 15 in NYC (anyone interested in health and technology innovation, particularly diabetes, is welcome to attend the DDD Demo Day, as it is free and open to the interested public).

There are seven core components of these start-up incubator programs:

1. Application
2. Guaranteed fixed funding (for those start-ups who are accepted)
3. Physical co-location
4. Limited program timeframe
5. Rapid iteration and innovation
6. Close mentorship and guidance
7. Demonstration (“Demo”) Day upon program culmination

I will touch on each of these seven components as it relates to DDD, but will expound a bit deeper on the last three components, which I would argue are the more exciting elements of the program (in particular the upcoming Demo Day). The DDD challenge incorporates virtually all of these elements with one exception outlined below. Regarding the first component, the competition accepted applications via its website July 1 through July 31, and five semi-finalists were chosen from the pool of applications and announced August 5. The second component (fixed funding) of DDD is explained simply here on the DDD homepage, but the total prize money to be awarded is $210,000. The third component is the only element not fully incorporated within the DDD challenge, as the program is a virtual incubator and did not provide physical office space nor require that the five semi-finalists be co-located together in New York. A limited time frame, or the fourth component of incubator programs is an attribute of DDD, as the five semi-finalists and mentors collaborated from August through September in the virtual incubator, and a detailed timeline of the overall challenge can be found here.

Rapid Iteration and Innovation: Any accelerator or incubator program encourages very rapid development of product or service prototypes. This is partly because these programs are a fixed and limited duration (i.e. typically 12 weeks from program start to demo day). Teams therefore need to work long, hard, and fast to get to Demo Day. While start-up life truly is a marathon, these programs are intended to be sprints and as anyone knows, you can’t sustain sprints for a long duration of time. Therefore, rapid development of prototypes is encouraged. Perfection isn’t always achieved nor desired within this complex time frame – but quick trial and error is a goal. This core tenant of lean start-ups is endorsed by Eric Ries, who has written several books around “Lean Startups”, as evidenced by a recent blog post of Eric’s called “The Power of Small Batches” (which is borrowed from his most recent book).

The DDD teams I’ve interacted with over the past few weeks as a mentor all have a fairly robust and long product development wish-list or roadmap. What they have all had to do throughout this program is:

• Determine which core product features they could reasonably develop for their platform or service offering in the time available prior to Demo Day
• Prioritize those core features
• Rapidly develop those core features
• Test those features

Close mentorship and guidance: It is true that the barriers to starting a company, particularly a technology based company are very low these days. Not only is it financially easier to say, start and launch a business website and build mobile apps, but there is an abundance of free or low cost knowledge and resources such as coder and hacker communities, seed/angel/VC investors, entrepreneur/start-up communities that can be accessed in real life or online by leveraging the Internet. As a result, there are those that question the value of start-up accelerators, but to be clear – they are not intended for every entrepreneur, they do not guarantee overnight or ultimate success for the start-up, and aren’t required to launch and grow an innovative and meaningful company. Most incubators are intended primarily for young or first time entrepreneurs. However, it should be noted that the DDD challenge and its virtual incubator model is slightly different than pure tech accelerators, in that it was constructed to encourage broad innovation in diabetes through the combination of data and design, and encourages all entrepreneurs, young and old, to endeavor in this important area. What the DDD challenge and tech accelerators do share is the reliance on a strong mentor community to help nurture the start-ups in the program. The quality, accessibility, and diversity of mentors define and distinguish how valuable an experience is going through one start-up accelerator versus another.

David Tisch, the Managing Director of TechStars NYC and I have shared conversations around what is the right metric of success for Managing Directors or Partners of accelerators – and ultimately it’s whether the entrepreneurs think they got value from the program, not so much in terms of the actual financial capital they received (and whether it was dilutive or not from an ownership perspective), but from the guidance they received from mentors, from the development and growth of their start-up during the program, and whether it was simply time well spent. Mentors can’t and won’t do everything for your start-up to succeed, but can help you think through the pros and cons of business or product strategy, link you up with other domain experts and potential investors, and push you and your team to work smarter and faster. At the end of such an accelerator program, if the program has been developed thoughtfully by its managing directors or partners (usually these accelerator programs are run by seasoned entrepreneurs with significant domain expertise and/or early stage investors) and the assembled cast of mentors do their job right, the graduating start-ups will provide testimony to the benefit of the accelerator; they should be fanatical ambassadors for that program’s brand and attest to its value. They and their business will have found their way in a much shorter period of time than if left on their own to figure things out.

Demo Day: This is the graduation ceremony for the start-ups of an accelerator program. It is the culmination of weeks of hard work and long hours. It is a celebration, whereby the companies show the world the progress they have made in the past few months of the program. An audience of journalists, investors, start-ups, and other people and companies interested in start-ups and innovation will be in attendance to learn more about these start-up companies who up until that point, might have been in stealth mode or have been figuring out the right product mix, business partnerships, go-to-market (GTM) strategy, and business model. Each company gets a few minutes (5 to 15 minutes typically) to present to the audience, and share two main things:

• Business plan: this should be similar to the quick elevator pitch or investment deck as if the company were pitching seed, angel or VC investors. It is not intended to be an exhaustive fifty page opus in Word, but a quick summary presentation around:
  • Team
  • Market/Problem
  • Solution/Value proposition
  • Competition
  • Business model
  • Launch/financing plans
• Demo of their actual product: ideally there will be a live product demo shared at Demo Day. Think of it as a show & tell from your elementary school days, but in reverse. At Demo Day – you typically tell first what you’re working on, but then you should follow-up and show. Most tech investors (VCs primarily, but also super-seed and super-angel investors) typically won’t invest with just only a business plan, formally in Powerpoint or written on the proverbial cocktail napkin. Proof of not just a business opportunity, but in product development and traction typically are table-stakes these days when a start-up is raising a serious round of financing (loosely speaking, anything above/over $150 – $200k). If a live demo can’t be shown, at least a staged demo should be provided so people can get an appreciation of what the technology and product looks and feels like from a design, UI/UX perspective. If neither a live or staged demo can be shared, some proof that there isn’t a significant technical and engineering hurdle can help assuage investors. Or in other words, some testimony that the “D” associated with R&D can be completed. It’s easy to tell a story and present a business case, but if you’re planning on raising more financing to support your company, build a team, and launch and develop a robust product, investors will want assurance that there isn’t technical risk (i.e. is it theoretically possible) risk or engineering risk (i.e. it’s not just theoretically possible, but this team or resources assembled can make what is theoretically possible into reality in a given timeframe with finite resources). Usually for popular tech accelerators, Demo Day is a frothy period of time where investors and journalists alike attempt to woo the hottest start-ups and build exclusive relationships, particularly in sexy verticals such as (for now) “social” or “deals” or “photo or video sharing”. It can be a long day for start-ups, as they prepare and rehearse their Demo but also longer story to be shared with the outside world, but it should be a celebration and a public announcement that they’ve made it through the program, and are ready to take on the world…. And who knows, perhaps raise a Series A(wesome).

While Demo Day typically marks the end of typical accelerator programs, DDD is slightly different in that it is primarily a challenge first, and then an incubator second. The challenge doesn’t stop on Thursday 9/15 at the DDD Demo Day in NYC. Judges at Demo Day will pick two finalists from the five current semi-finalists who will then each receive an additional $10,000 to help pilot their prototypes in community uptake exercises in October. This will be a great opportunity for the finalist companies to not just talk the talk, but walk the walk in terms of actual live implementation of their product or service in the field so that they can continue iterating and enhancing their value proposition. A final challenge winner will be selected after the community exercises are conducted and receive the $100,000 final grand prize in November to further accelerate their company’s growth. They will also have an opportunity to further incubate at the Rock Health health technology app accelerator for a month. I am sure I speak for not just myself, but all the DDD mentors in that we are impressed in how much has been accomplished in a short period of time, and eagerly await not just Demo Day this week, but the further development of several health tech companies this fall.

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